AUD/USD Forecast August 12-16 – Aussie stems slide, but new Trump tariffs could signal trouble.

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AUD/USD was almost unchanged last week, halting a sharp slide of 3.4% which started in late July. This week’s key events are business and consumer confidence reports and employment change. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
In Australia, the focus was on the RBA rate decision. The bank maintained rates at an even 1.0% and RBA Governor Philip Lowe had a dovish message for the markets. Lowe noted that trade tensions remained a pressing concern and said that the weak housing market and a lack of wage growth had weighed on the economy.
The trade war between the U.S. and China continues to escalate, which could well impact on risk currencies like the Aussie. China officially canceled all purchases of all U.S. agricultural products, a response to the U.S. decision to slap a 10% tariff on some $300 billion in Chinese products. As well, China devalued its currency to a 10-year low against the dollar, prompting the U.S. to label China as a “currency manipulator”.
In the U.S., the ISM Non-Manufacturing PMI slowed to 53.7 in July, its lowest level in almost three years. This is indicative of weaker expansion in the services sector. The week wrapped up with inflation data, which remains at low levels. The producer price index was unchanged at 0.2%, matching the forecast. The core release declined by 0.2%, its first decline of the year.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:

  1. NAB Business Confidence: Tuesday, 1:30. The National Australia Bank index pointed to a sharp drop in confidence in June, with a weak reading of 2 points. This was much lower than the reading of 7 in the previous release.
  2. Westpac Consumer Sentiment: Wednesday, 0:30. This indicator should be treated as a market-mover, as stronger consumer confidence can translate into an increase in consumer spending. The indicator posted a sharp decline of 4.1% in July. Will we see an improvement in August?
  3. Wage Price Index: Wednesday, 1:30. Wage growth has been steady, with the index posting two straight gains of 0.5%. No change is expected in the June release.
  4. MI Inflation Expectations: Thursday, 1:00. Consumer inflation expectations dipped to 3.2% in June, its lowest gain since October 2016. We will now receive the July release.
  5. Employment Data: Thursday, 1:30. After three excellent gains, job creation slowed to just 0.5 thousand in June. This was shy of the forecast of 9.1 thousand. The markets are expecting a rebound in July, with a forecast of 14.2 thousand. The unemployment rate has been pegged at 5.2% for three successive months. No change is expected in the July release.

*All times are GMT

Technical lines from top to bottom:

0.7165 has held in resistance since early April.

0.7085 was a low point in September. 0.7022 is next.

0.6988 marked the low point in April.

0.6865 has some room as resistance as AUD/USD continues to lose ground.

0.6825 (mentioned last week) is in a new role as a resistance line.

0.6744 was tested in support in the middle of the week, but the pair then moved higher.

0.6686 was a cap back in January 2000.

0.6627 has held in support since March 2009. 0.6532 is next.

0.6456 is the final support level for now.

I remain bearish on AUD/USD

Trade tensions have spiked between China and the U.S., which has soured investor risk appetite. Domestically, the economy is struggling, and RBA Governor Lowe’s lukewarm assessment of the economy could weigh on the Aussie.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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